The BBC faces a host of challenges as it enters the digital age - is it equipped to meet them? By BBC News Online's Dominic Casciani.

As Greg Dyke arrived at the BBC in 1999, he said that he was aware that the corporation was at an "extraordinary moment" in its history.

"The digital revolution is upon us," he said.

If the former director general Lord Birt's role had been to prepare one of the largest media organisations in the world for a media revolution, then Greg Dyke's responsibilities as his successor are to make it happen.

The inheritance

After seven years at the top of the BBC, the then Sir John Birt had completely restructured the corporation.

BBC Facts

Charter expires in 2006

Receives £2.15bn a year

80% of budget on core TV and Radio service

Online services launched 1997

He set out to make the organisation more efficient with changes including splitting the arm of the BBC that commissions programmes from the arm that produces them.

He introduced "producer choice" giving the programme makers the power to buy services from outside the BBC - effectively creating an internal market.

And in news, television and radio were controversially merged into a "bi-media" world, something that was vehemently opposed by many staff.

Speaking at the time, Sir John said the changes made the BBC more agile, more competitive and allowed it to expand beyond its traditional broadcasting services.

Indeed, speaking at the Edinburgh Television Festival in 1996, he said that without the resources to prepare for the digital age, the BBC would be "history".

Lord Birt: Seven years of controversy

By the time he had left, the corporation had entered the digital age with its online arm, including BBC News Online, and its digital television arm, including BBC News 24 and a "third" channel, BBC Choice.

The BBC had also forged more links with the commercial sector including the American Discovery channel and cable TV services.

Those changes came at a cost. Critics of the Birt era said that the BBC had become burdened with bureaucracy and managers and that the creative talent that was the hallmark of the corporation was demoralised.

The launch of the new digital channels and online services led to fears that the BBC could be over-stretched with almost £200m a year being diverted from what many regarded as the "core services" of BBC One, Two and the five nationwide radio networks.

Furthermore, the BBC had lost a host of rights to sporting events - leading many to ask whether the public service broadcaster had any role left at all.

Priorities

On taking up his post, Greg Dyke effectively set five priorities:

Maintain audience share

Cut management

Cut bureaucracy

Attract and keep talent

Prepare for the digital age

Greg Dyke said he wanted to raise the amount spent on programmes from the current 76% to 85% in five years - effectively releasing £200m from bureaucracy for the BBC's creative arms.

The new structure, already being implemented, is based on the powerful heads of 17 restructured departments reporting directly to the director general.

Greg Dyke: Balancing act

This will theoretically speed up the decision-making process and make the strategic heart of the corporation more responsive to an increasingly competitive media world.

All of this has come at a price - 1,100 job losses, including the planned closure of one of the oldest names in British broadcasting, the Pebble Mill studios in Birmingham.

One of Greg Dyke's key projects is also to resurrect BBC Sport which, despite his efforts, has lost rights to Premiership football from next season.

Mr Dyke argues that he could not justify the sums being demanded - but the FA Cup was returning to the portfolio.

Digital revolution

In its announcement on the future of the BBC's licence fee, the government supported the case for it to be increased providing there was a fundamental review of the BBC's digital services.

Chief among these is BBC News 24.

BBC News 24: Government review

It exists in a crowded rolling-news world, now with two key competitors in the shape of Sky News and ITN and has high running costs.

There have also been question marks over the two other digital channels currently in operation - Choice and Knowledge.

Some critics suggest that they were quickly rolled out under Birt without, in the case of Choice, a great deal of thought as to what their audience would be and how they comply with the BBC's public service remit.

Dyke broadly supports the Birt digital strategy, but has already confirmed that Choice and Knowledge could become a new "BBC Three" and "BBC Four".

He says that its public service mission requires it to bridge the "digital divide", producing quality educational services on the internet, through interactive television and among the plethora of channels that will soon inhabit the digital world.

The BBC's opponents say that the suggestion that the commercial sector is either not interested or incapable of providing these services, such as a mooted online curriculum for schools, just isn't true.

Public service future?

All of this inevitably will affect what kind of channels BBC One and Two are.

If the digital age means people can effectively pick and choose what kind of television they watch, how they watch it and when, where does that leave broad-based services such as these?

Should they move to a more genre based format, for instance BBC One being the "entertainment" channel? And if they did so - how could the BBC be said to be still delivering a public service?

The BBC maintains the case is found in a substantial but separate "top up" licence fee to cover a significant move to a digital service.

It argues that if it is allowed to develop a new BBC presence in the digital age, it will encourage people to adopt the new technology - just as they did with colour television.

But this is raising questions about the nature of the BBC in a fiercely competitive and globalised media environment - and they are questions that could produce some uncomfortable answers for the corporation.